All posts tagged superannuation

ASIC and the ATO have on numerous occasions highlighted the dangers of buying property through one organisation that organises all steps in the process. they call them “one-stop-shops”. This is where you get all or most of the following services for a new SMSF from one associated group:

Property Adviser who does initial training or introduction to property investing, then pointing you to associated service providers

Accounting and Audit to set up and do the admin for your new SMSF

Financial Planner to prepare a Statement of Advice on the suitability, risks, costs, benefits of and SMSF and benefits lost in moving to an SMSF

Conveyancer to process the property transaction

Mortgage Broker to sort out the finance

One of the issues is that they may not be very transparent about how they’re interconnected. Always ask each party what their fees are and do they pay any form of remuneration, fees, referral commission charges etc to any other party.

SMSF property one-stop shops

397 – “The use of property one-stop shops is an area of significant concern. These models tend to promote the purchase of geared residential property through an SMSF, arranged by groups of related real estate agents, developers, mortgage brokers, accountants and financial advisers.

398 – The one-stop shop model creates inherent conflicts of interest that may affect the advice given to a client to set up an SMSF, make subsequent investments, or use specific services. These conflicts can arise from direct or indirect commissions, referral payment arrangements, representative remuneration structures or even management pressures.

399 – We have previously achieved enforcement outcomes against operators of property one-stop shops involving SMSFs—such as Park Trent PropertiesGroup Limited and Anne Street Partners. In light of the findings from this project, we will continue to conduct surveillance on these property one-stopshop operators and take enforcement action where appropriate.

400 – We will also work with other regulators, including the ATO and APRA, to develop a holistic approach to addressing problems that we are seeing with property one-stop shops.”

Despite these warnings ASIC’s further research has shown that people still value the idea of a One-stop-shop for their advice needs when buying property. I assume this is because people just like simplicity and want someone to manage the process for them. Well you can have that simplicity without the inherent dangers involved by choosing to work with professionals who charge a fee for service for their advice and do not accept commission or any remuneration from other parties or fully disclosed like such as with a Mortgage Broker who is remunerated by the lender.

So when thinking about a property for your Self Managed Superannuation Fund or any asset really, you should always ensure that at least some of the providers of services are working in your Best Interests. Financial Planners are obligated by law to act in their Client’s Best Interest but we all know that money , fees or commissions may blur the lines. So don’t be afraid to ask questions about:

who is providing you the advice

how are they being paid,

Are they receiving any other form of remuneration

how are they connected to the other service providers

It is important for your professional service providers to work on strategies on your behalf but that does not mean they need to be paying fees to each other which ultimately increases your costs. Let me explain how I work with other professional service providers for example:

I do not provide specific advice on “the property” for you and stick to my area of expertise; whether an SMSF is right for you and how you can use it to achieve your goals. I charge you a specific fee for this advice which is outlined in a Letter of Engagement before you commit to my service. If you want ongoing advice, again I explain it up front in an Ongoing Service Agreement.

I provide you with a range of SMSF Admin and Audit solutions from other providers that will suit your needs. I have 4-5 options to ensure you can choose what suits you with our guidance and often that may be to use your current Accountant. I do not receive any commission, fees or other remuneration from these providers. I simply insist they take good care of my clients

If people want help choosing a property, again I have a number of trusted Buyer’s Agents throughout the country that are on hand to provide advice. I do not receive any commission, fees or other remuneration from these providers. I simply insist they take good care of my clients.

If you need assistance in getting finance arranged then I refer you to a number of brokers who have experience and expert knowledge in SMSF Lending. I do not receive any commission, fees or other remuneration from these providers. I simply insist they take good care of my clients.

Legal Advice/Conveyancing – If you do not have a current lawyer or they do not have SMSF experience then I refer clients to a number of lawyers / conveyancers with specific experience and expertise in the rules around SMSFs for property transactions, powers of attorney and estate planning.

I do not receive any commission, fees or other remuneration from these providers. I simply insist they take good care of my clients.

Can you say the same about your service providers?

Are you looking for an advisor that will keep you up to date and provide guidance and tips like in this blog? Then why not contact me at our Castle Hill or Windsor office in Northwest Sydney to arrange a one on one consultation. Just click the Schedule Now button up on the left to find the appointment options.

This information has been prepared without taking account of your objectives, financial situation or needs. Because of this you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation and needs. This website provides an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such.

Sometimes you can’t sit back and accept policy changes by governments. You have to step up to stop bad policy regardless of your political persuasion.

I see that Geoff Wilson from Wilson Asset Management is leading a charge against the Labor proposed policy to deny a refund of excess franking credits. You can read more about his efforts in this article here and sign his petition here

The problem is that many people don’t understand the imputation system so when I sit with clients and we talk about what it means for them we have to put it in terms they understand. For many of my self funded retirees it will mean $5000 to $20,000 loss in income per year going forward if past in to legislation. So they may still be able to meet their basic living expenses but it is the little extras that they worked hard to save for that they will lose and it feels like they are been punished for trying to fund their retirement.

It means cutting out the holiday, the presents for the grandkids, the renos on the bathroom or any other little things they had saved hard to be able to afford. So once alerted to the potential loss of income most are angry but too few have been made aware of it by their tax agents and advisors.

Lets get the word out there so people understand what they will be losing

Are you looking for an advisor that will keep you up to date and provide guidance and tips like in this blog? Then why not contact me at our Castle Hill or Windsor office in Northwest Sydney to arrange a one on one consultation. Just click the Schedule Now button up on the left to find the appointment options.

This information has been prepared without taking account of your objectives, financial situation or needs. Because of this you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation and needs. This website provides an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such.

One of my most popular long term blogs is Why Self Managed Super Funds Should Have A Corporate Trustee and thankfully most new SMSFs are finally being set up with a corporate trustee from the outset. But that leaves many existing SMSFs with Individual Trustees and I get numerous questions about the cost of the transfer process. If you are considering an SMSF the I would encourage you to read through that article and feel free to pass it on to your friends, family or advisors.

Bullion/Coins – just usually require a request in writing, copy of the Company Certificate of Registration and copy of the Trust Deed Amendment

Ongoing Costs

Costs should not be a deterrent as a sole Purpose Trustee company ASIC review fee is only $53 per year and you can lock that in and get a discount for up to 10 years. See here for more detail on that discount.

Don’t feel like trying to do all this yourself? How much do we charge for guiding you through the process

If you require assistance and advice on making the changes our advice fee is approximately $3,300 as it is a time consuming process. This includes:

Review of your current circumstances and portfolio to see what needs to be done

Are you looking for an advisor that will keep you up to date and provide guidance and tips like in this blog? Then why not contact me at our Castle Hill or Windsor office in Northwest Sydney to arrange a one on one consultation. Just click the Schedule Now button up on the left to find the appointment options.

This information has been prepared without taking account of your objectives, financial situation or needs. Because of this you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation and needs. This website provides an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such.

Many SMSF investors have listed and unlisted exposure to commercial property in their portfolios and much of that is retail exposure so I was looking for some up to-date guidance on the Australian retail property sector specifically for a client and decided to share this article that I found from APN Funds Management This is neither a recommendation nor a paid advertisement from APN, just me passing on what I felt was a good analysis of the current state of play in Australian retail property. So here goes:

If you’re looking for a reason why the share price of Retail AREITs in the ASX 300 are down 2.3% over the last two years, there’s your answer. You may also think these falls are justified. If so, we’d suggest you do three things.

The first is to take heed of the last 12 months performance. The retail sector is up 14% (even outperforming the overall AREIT market) as investors realise the value that has been created by the over selling of the sector.

The second is to visit your local super regional shopping centre, maybe Chadstone in Melbourne, Bondi Junction in Sydney or Carindale in Brisbane. On arrival, take a look around. It’s busy isn’t it? And how about those families, maybe three generations wide, engaging in an activity that is as much social as it is commercial?

These small groups are simply doing something together in a clean, convenient, climate controlled, secure and accessible environment. For them, shopping is not a chore. This is not something they want to substitute for online shopping, huddling around a mobile phone, looking at pictures of shoes.

Both activities might lead to a sale but there is a world of difference in the social activity and environment that precedes it.

The third suggestion is to consider the view of experienced investors that study shopping centre assets for a living and get their take on retail Armageddon.

Yes, there are such people, and APN Property employs quite a few of them. Between us, we have 84 years of commercial property investing experience.

We dig deep into the demand and supply dynamics that drive local retail property markets, analysing everything from personal income growth, population data and economic growth indicators to individual shopping centre performance, vacancy rates and rental growth.

For us, this is the only way to establish the attractiveness or otherwise of a retail property. If, for example, a particular property market has excess supply, low population growth, weak “buying power” (lower income levels) and low economic growth – it is best avoided.

It is our view that not only is Armageddon highly unlikely, the prevalence of the belief that it is, offers an opportunity.

This approach delivers a very different picture from the narrative seeping into the mainstream media, foretelling empty shopping centres, declining retail brands and the end of shopping as a social activity.

This is what our research tells us about Australia’s current retail property markets:

The Melbourne regional shopping centre market is typified by low per capita supply, driven by the strongest population growth and Gross State Product (GSP). It is also enjoying below average new supply across all retail sectors. This is an attractive market ripe with investment opportunities.

The same cannot be said of south east Queensland, a market typified by an excess supply of all categories of retail property, especially in the vulnerable sub-regional centre category. The region also suffers from below average GSP and only average population growth. The current supply phase is well in excess of national averages across most sectors and will likely compound return weakness in the region.

In Perth, a large pipeline of new retail space is in development, a “catch up” following years of oppressive town planning restrictions and retail trading laws stifling the market. As a consequence, a number of existing centres are experiencing major extensions, including Mandurah Forum, Westfield Carousel, Midland Gate Shopping Centre, Booragoon and Karinyup. This new supply looks excessive but being aware of the historic context makes us more comfortable.

In Sydney, the market has elevated levels of new Neighbourhood and Large Format space being built. But compared with the rest of Australia there appears to be less of the weak sub-regional shopping centre space and less new supply looming. And Sydney’s higher than average regional space provision appears consistent with the population’s superior spending power.

It hardly sounds like Armageddon, does it? In Australian retail property, overall growth is broadly positive, current supply is not excessive (in an absolute sense – relative to other developed, comparable markets around the world) and neither is new supply excessive.

South east Queensland has some challenges and Melbourne is fundamentally strong but overall Australia’s retail property market is well positioned for slow and steady growth. Armageddon appears unlikely.

Retail property is not dead. We are, however, witnessing a cyclical slowdown. Different to past cycles, it has been confused by less experienced investors as a structural issue.

It’s this kind of measured, fact-based analysis that you won’t read about in the media. Instead, Amazon’s arrival has led to a kind of scaremongering that defies reality. Professional investors like us enjoy and aim to profit from the disparity, as we hope will investors in APN’s AREIT Fund. The headlines point one way, the facts quite another. Personally, I prefer facts.

This article has been prepared by APN Funds Management Limited (ACN 080 674 479, AFSL No. 237500) for general information purposes only and without taking your objectives, financial situation or needs into account. You should consider these matters and read the product disclosure statement (PDS) for each of the funds described in this article in its entirety before you make an investment decision. The PDS contains important information about risks, costs and fees associated with an investment in the relevant fund. For a copy of the PDS and more details about a fund and its performance,

Looking for an adviser that will keep you up to date and provide guidance and tips like in this blog? Then why now contact me at our Castle Hill or Windsor office in Northwest Sydney to arrange a one on one consultation. Just click the Schedule Now button up on the left to find the appointment options. Do it! make 2016 the year to get organised or it will be 2026 before you know it.

Please consider passing on this article to family or friends. Pay it forward!

This information has been prepared without taking account of your objectives, financial situation or needs. Because of this you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation and needs. This website provides an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such.

I recently took part in a panel discussion on Peter Switzer’s Money Talks program on Sky Business around end of year tax planning. you can view the 20 minute show below for for some tips from all the panel. What was clear from the audience questions after the show is that many people just don’t know the strategies available to them.

But its now 5 days before the end of the financial year and many people may think it is too late! But there are still strategies you can still out in place.

1.Think first. First tip is to think carefully on each strategy before implementing any of them. review the eligibility criteria and your own personal circumstances.

2. Review Your Concessional Contributions – $25K this year if under 65 and then work test applies for 65+.

Maximise contributions up to concessional contribution cap but do not exceed your Concession Limit. The sting has been taken out of Excess contributions tax but you don’t need additional paperwork to sort out the problem. So check employer contributions on normal pay and bonuses, salary sacrifice and premiums for insurance in super as they may all be included in the limit. This year for the first time for employed people, you can still top up directly to your Superfund or SMSF without having to go through your employer and salary sacrifice. Work out you available cap and make a Personal contribution now!

3. Review your Non-Concessional Contributions

Have you considered making non-concessional contributions to move investments in to super and out of your personal, company or trust name. Maybe you have proceeds from and inheritance or sale of a property sitting in cash. As shares and cash have increased in value you may find that personal tax provisions are increasing and moving some assets to super may help control your tax bill. Are you nearing 65? then consider your contribution timing strategy to take advantage of the “bring forward” provisions before turning age 65 to contribute up to the $300,000.

4. Co-Contribution

Check your eligibility for the co-contribution and if you are eligible take advantage. You can get up to $500 co-contribution from the government so it is not as attractive as previously but it is free money – grab it if you are eligible. Check here for details

To calculate the super co-contribution you could be eligible to receive based on your income and personal super contributions, use the Super co-contribution calculator.

5. Spouse Contribution

People are eligible to claim the maximum tax offset for the 2017-18 $540 if:

you contribute to the eligible super fund of your spouse, whether married or de-facto, and

your spouse’s income is $37,000 or less.

The tax offset amount will gradually reduce for income above this amount and completely phases out when your spouse’s income reaches $40,000.

6. Over 65? Do you meet the work test? (The 40 hours in any 30 days rule)

You should review your ability to make contributions as if you if you have reached age 65 you must pass the work test of 40 hours in any 30 day period during the financial year, in order to continue to make contributions to super. Check out ATO superannuation contribution guidance

7. Check any payments you may have made on behalf of the fund.
It is important that you check for amounts that may form a superannuation contribution in accordance with TR 2010/1 (ask your advisor), such as expenses paid for on behalf of the fund, debt forgiveness or in-specie contributions, insurance premiums for cover via super paid from outside the fund.

8. Notice of intent to claim a deduction for contributions
If you are planning on claiming a tax deduction for personal concessional contributions you must have a valid ‘notice of intent to claim or vary a deduction’ (NAT 71121). If you intend to start a pension this notice must be made before you commence the pension. Many like to start pension in June and avoid having to take a minimum pension but make sure you have claimed your tax deduction first.

9. Contributions Splitting
Consider splitting contributions with your spouse, especially if:
• your family has one main income earner with a substantially higher balance or
• if there is a n age difference where you can get funds into pension phase earlier or
• If you can improve your eligibility for concession cards or pension by retaining funds in superannuation in younger spouse’s name.
This is a simple no-cost strategy I recommend everyone look at especially with the Government moving on limiting the tax free balance on accounts. See my blog about this strategy here.

10. Off Market Share Transfers (selling shares from your own name to your fund)
If you want to move any personal shareholdings into super you should act early. The contract is valid once the broker receives a fully valid transfer form not before. It takes about 4 days to implement this from the brokers end so Tuesday 26th would be the cut off day for the forms to be received by your broker. YOU CAN DO IT!

11. Pension Payments
If you are in pension phase, ensure the minimum pension has been taken. For transition to retirement pensions, ensure you have not taken more than 10% of your opening account balance this financial year.

The following table shows the minimum percentage factor (indicative only) for each age group.
Age Minimum % withdrawal (in all other cases)
Under 65 4%
65-74 5%
75-79 6%
80-84 7%
85-89 9%
90-94 11%
95 or more 14%

Sacrificial Lamb

Think about having a sacrificial lamb, a second lower value pension that can sacrificed if minimum not taken. In this way if you pay only a small amount less than the minimum you only have to lose the smaller pensions concession rather than the concession on your full balance. When combined with the ATO relief discussed in the following article “What-happens-if-i-don’t-take-the-minimum-pension” you will have a buffer for mistakes.

Before reading the following:Be careful not to reset a pension that has been grandfathered under the new deeming of pension rules that came in on Jan 1st 2015 without getting advice.

12. Reversionary Pension is often the preferred option to pass funds to a spouse or dependent child.
You should review your pension documentation and check if you have nominated a reversionary pension. If not, consider your family situation and options to have a reversionary pension. This is especially important with blended families and children from previous marriages that may contest your current spouse’s rights to your assets. Also consider reversionary pensions for dependent disabled children. the reversionary pension may become more important with the application of the proposed budget measure on $1.6m Transfer limit to pension phase. If funds already in pension and reverting to another person then the beneficiary has 12 months to implement strategies to maximise how much they can retain in the superannuation system.

13. Review Capital Gains Tax Position of each investment

If you have been affected by the changes in the rules on taxation of TTR Pensions and the implementation of the $1.6m Transfer Balance Cap then you should be considering the CGT relief that may be available to your fund.

In accumulation phase review any capital gains made during the year and over the term you have held the asset and consider disposing of investments with unrealised losses to offset the gains made.

If in pension phase then consider triggering some capital gains regularly to avoid building up an unrealised gain that may be at risk to government changes in legislation like those imposed in 2017/18

14. Review and Update the Investment Strategy not forgetting to include Insurance of Members

Review your investment strategy and ensure all investments have been made in accordance with it, and the SMSF trust deed. Also, make sure your investment strategy has been updated to include consideration of insurances for members. See my article of this subject here. Don’t know what to do…..call us.

15. Collate and Document records of all asset movements and decisions

Ensure all the funds activities have been appropriately documented with minutes, and that all copies of all statements and schedules are on file for your accountant/administrator and auditor.

16. Double Dipping! June Contributions Deductible this year but can be allocated across 2 years.

For those who may have a large taxable income this year (large bonus or property sale) and are expecting a lower taxable next year you should consider a contribution allocation strategy to maximise deductions for the current financial year. This strategy is also known as a “Contributions Reserving” strategy but the ATO are not fans of Reserves so best to avoid that wording! Just call is an Allocated Contributions Holding Account.

17. Market Valuations – Now required annually

Regulations now require assets to be valued at market value each year, ensure that you have re-valued assets such as property and collectibles. Here is my article on valuations of SMSF investments in Private Trusts and Private Companies. For more information refer to ATO’s publication Valuation guidelines for SMSFs.

18. In-House Assets

If your fund has any investments in in-house assets you must make sure that at all times the market value of these investments is less than 5% of the value of the fund. Do not take this rule lightly as the new SMSF penalty powers will make it easier for the ATO to apply administrative penalties (fines) for smaller misdemeanors ranging from $820 to $10,200 per breach.

20. Do you need to update to a Corporate Trustee

21. Check the ownership details of all SMSF Investments

Make sure the assets of the fund are held in the name of the trustees on behalf of the fund and that means all of them. Check carefully any online accounts you may have set up without checking the exact ownership details. You have to ensure all SMSF assets are kept separate from your other assets.

22. Review Estate Planning and Loss of Mental Capacity Strategies.

Review any Binding Death Benefit Nominations (BDBN) to ensure they are valid (check the wording matches that required by the Trust Deed) and still in accordance with your wishes. Also ensure you have appropriate Enduring Power of Attorney’s (EPOA) in place allow someone to step in to your place as Trustee in the event of illness, mental incapacity or death. Do you know what your Deed says on the subject? Did you know you cannot leave money to Step-Children via a BDBN if their birth-parent has pre-deceased you?

23. Review any SMSF Loans

Have you provided special terms (low or no interest rates , capitalisation of interest etc.) on a related party loan? Then you need to review your loan agreement and get advice to see if you need to amend your loan. Have you made all the payments on your internal or third-party loans, have you looked at options on prepaying interest or fixing the rates while low. Have you made sure all payments in regards to Limited Recourse Borrowing Arrangements (LRBA) for the year were made through the SMSF Trustee? If you bought a property using borrowing, has the Holding Trust been stamped by your state’s Office of State Revenue. Please review my blog on the ATO’s Safe Harbour rules for Related Party Loans here

24. Valuations for EVERYTHING

Not just for property, any unlisted investment needs to have a market valuation for 30 June. If you need assistance on how to value unlisted or unusual assets, including what evidence you’re going to need to keep the SMSF auditors happy, then contact us.

25. Collectibles

Play by the new rules that come into place on the 1st of July 2016 or get them out of your SMSF. More on these rules and what you must do in a good blog from SuperFund Partners here.

Are you looking for an advisor that will keep you up to date and provide guidance and tips like in this blog? then why now contact me at our Castle Hill or Windsor office in Northwest Sydney to arrange a one on one consultation. Just click the Schedule Now button up on the left to find the appointment options.

This information has been prepared without taking account of your objectives, financial situation or needs. Because of this you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation and needs. This website provides an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such.

I wrote an article a few years ago for MYOB’s small business blog called How much do I need to retire at 60? that certainly caused some heated debate and has been viewed over 425,000 times. The comments we got on that article were amazing and eye-opening to see how people’s vision of a “budget” and “comfortable lifestyle” is so different depending on their personal circumstances.

Some of the figures used for sample retirement budgets have been updated so I thought I would provide those figures as guidance for people facing the retirement funding conundrum and not sure where to start. I have also included figures more specific to the average SMSF member and those who want to have a much more than just “comfortable” lifestyle

The latest figures released by the Association of Superannuation Funds of Australia ASFA Retirement Standard benchmarks the annual budget needed by Australians to fund either a ‘comfortable’ or ‘modest’ standard of living in retirement.

Budgets for various households and living standards for those aged around 65
(March quarter 2018, national)

Modest lifestyle

Comfortable lifestyle

Single

Couple

Single

Couple

Total per year

$27,368

$39,353

$42,764

$60,264

Budgets for various households and living standards for those aged around 85
(March quarter 2018, national)

Modest lifestyle

Comfortable lifestyle

Single

Couple

Single

Couple

Total per year

$25,841

$36,897

$40,636

$56,295

Source ASFA Retirement Standard. The figures in each case assume that the retiree(s) own their own home and relate to expenditure by the household. This can be greater than household income after income tax where there is a drawdown on capital over the period of retirement. Single calculations are based on female figures. All calculations are weekly, unless otherwise stated.

The figures in each case assume that the retiree(s) own their own home and relate to expenditure by the household. This can be greater than household income after income tax where there is a drawdown on capital over the period of retirement. Single calculations are based on female figures. All calculations are weekly, unless otherwise stated.

As you can see from the figures if you are looking at a ‘comfortable’ retirement at age 65-67 you need to consider a budget of $60,264 for a couple or $42,764 for a single person household.

In my previous article I talked about retiring at age 60 but as most people will be looking more likely at 65 as their target, I wanted to clarify what I believe you need to fund such a retirement. In my opinion a couple would need a combined superannuation and non-super investment assets balance of around $760,000 minimum and a single individual would need a balance of around $560,000. This at odds with ASFA who have increased their requirement by a whopping $130,000 but still have lower figures than mine as they believe you only need $640,000 for a couple or $545,000 as a single person.

My figures are based on No Centrelink Support. I am happy to accept ASFA are correct if you take into account some age pension but I find that many clients do not qualify for this because of non-income producing assets like holiday homes, caravans boats etc reducing their pension entitlements. Also there is an inherent risk that the now reduced Asset and Income Test limits may be reduced further in the search for more Government Budget Savings.

SMSF Members save more for a better lifestyle

So let’s get take it for granted that an SMSF member wants a bit better than just a Comfortable lifestyle. My friends at Accurium who I use to do Retirement Healthchecks for my clients came up with these figures for those looking for a better lifestyle and having at least 50% chance of sustaining it for their life expectancy. This assumes all you capital will be used in your lifetime. If you want more detail and options on having capital to pass on to your children then visit Accurium’s website to access their full report.

Spend

Level of savings needed

ASFA Comfortable ($60,000 p.a.)

$580,000

SMSF typical spend ($80,000 p.a.)

$1,100,000

SMSF aspirational spend ($100,000 p.a.)

$1,600,000

Source: Accurium – Retirement Insights Vol 7

So have a look below at what the ASFA Retirement Standard includes and then add in your own preferences to find out your ideal budget and capital requirement.

The Standard includes the cost of things such as health, communication, clothing, travel and household goods.

Comfortable lifestyle

Modest lifestyle

Age Pension

Single

$42,764 a year

$27,368 a year

$21,222 a year *

Couple

$60,254 a year

$39,353 a year

$31,995 a year *

Replace kitchen and bathroom over 20 years

No budget for home improvements. Can do repairs, but can’t replace kitchen or bathroom

No budget to fix home problems like a leaky roof

Better quality and larger number of household items and appliances and higher cost hairdressing

One leisure activity infrequently, some trips to the cinema or the like

Only taking part in no cost or very low cost leisure activities. Rare trips to the cinema

Figures from March Quarter 2018.

Most people I see in my day-to-day work advising on retirement planning have a “sugar coated view” of how they want to spend their time in retirement. Many have hobbies or interests that cost very little but others who like international travel or partaking in expensive social lifestyles of hobbies often under-estimate the costs.

Another worrying trend is people borrowing in their 50’s to fund lifestyle for fear of missing out or to keep up with the Jones! Others are helping children with home deposits and losing the vital compounding interest on their savings. Many tell me they believe they can live on the Government Age Pension in retirement. Well if you can’t manage on your current wage now without borrowing then you are in for a big shock if you plan to rely on the meagre Age Pension.

I see one industry commentator saying that the savings required to live a modest lifestyle in retirement only requires a small amount of retirement savings in addition to the age pension, however that sort of budget leaves you very vulnerable to food and utility price inflation as people will have seen with rising vegetable and electricity pricing in the last few years.

When you look at these estimates of the amount capital or assets you need to achieve the lifestyle you want in retirement, it’s still important to remember that most of these work on the average life expectancy. If your family has a history of longevity or early death, then you need to make allowances accordingly.

The bottom line: It’s never too early and hopeful not too late to start planning. So if you want to see where you stand at present based on your current savings and contributions to super, then use the Retirement Planner on the ASIC’s free Money Smart website.

Once you work out you target you should consider seeing a Financial Planner to see what strategies are available to you to boost your savings such as using a Transition to Retirement Pension and Salary Sacrifice strategy to save on personal and superannuation tax and build your nest egg.

Are you looking for an advisor that will keep you up to date and provide guidance and tips like in this blog? then why now contact me at our Castle Hill or Windsor office in Northwest Sydney to arrange a one on one consultation. Just click the Schedule Now button up on the left to find the appointment options.

This information has been prepared without taking account of your objectives, financial situation or needs. Because of this you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation and needs. This website provides an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such.

Self-funded retirees have felt like punching bags for the last few years with hit after hit chipping away at their ability to fend for themselves within the rules they had relied upon in making their savings plans over the last 30 years. Combine the changing of goal posts with low interest rates and blue-chip underperformance from the banks, telcos and utilities and they are not to be blamed for thinking a hex had been put on them.

So an SMSF friendly budget is the welcome news coming out of the 2018-19 Federal Budget. With many of us SMSF Specialists and you the SMSF members still working through the wide-reaching and complex superannuation changes which took effect from 1 July 2017, this Federal Budget will provide much needed stability while looking to reduce costs for SMSFs and prove additional flexibility.

The key changes proposed for SMSFs and superannuation are:

Three-yearly audit cycle for some self-managed superannuation funds.

The Government will change the annual SMSF audit requirement to a three yearly requirement for SMSFs with a history of good record keeping and compliance. The measure will start on 1 July 2019 for SMSF trustees that have a history of three consecutive years of clear audit reports and that have lodged the fund’s annual returns in a timely manner.

One concern I have is if trustees make a mistake in year 1 that is not discovered until year 3, will they face 3 years interest charges on the penalties.

Expanding the SMSF member limit from four to six

As already announced, the Federal Government confirmed its decision to expand the number of members allowed in an SMSF from four to six. Expanding the definition of an SMSF to a fund with a maximum of six members will provide greater flexibility in how funds can be structured.

Whilst there are some concerns over making decisions I like this move where as mum and dad in their later years want to reduce their involvement but they want help rather with the fund rather than moving to separate retail funds. It may help prevent elder Financial abuse where instead of one child assuming control of the SMSF, more of the family could be involved. Temptation and inheritance impatience is always there for one person but add a few others in to the decision making and the risk of financial abuse reduces considerably.

Also 6 members of a family small business allows for later drawdown from the parents accounts and recontribution for younger family members to retain business real property in the fund after death of the older generation.

Note; you will need to ensure your trust deed allows more than 4 members and it most likely won’t so you will need to update the trust deed first before accepting new members. READ THE DEED

Over 65, 1 additional year Work test exemption

The Government will provide more time for Australians aged 65 to 74 to boost their retirement savings, by introducing an exemption from the superannuation work test.This exemption will apply where an individual’s total superannuation balance is below $300,000 and will permit voluntary superannuation contributions in the first year that they do not meet the work test requirements.

This is good but limited in its scope as more and More people have reached the $300k level because of Super Guarantee Contributions for most since 1992 or before for some. But it is a female friendly move as they are most likely to have lower balances

Life insurance cover in super to be opt-in for individuals under 25 years of age.

The Government will legislate that life insurance cover in superannuation will be opt-in for those individuals under 25 years of age or with account balances under $6000 to ensure that unnecessary fees do not erode smaller balances.

Life insurance cover will also cease where no contributions have been made for a period of 13 months.

If you have kept a retail or industry fund open with small balances to retain insurances you may need to put a small annual contribution in place (I would recommend $100 per half year just in case) to ensure it does not get tagged as dormant.

Older Australian package

The Government introduced the following measures to enhance the standard of living older Australians:

• Increase to the Pension Work Bonus from $250 to $300 per fortnight.

• Amendments to the pension means test rules to encourage the take up of lifetime retirement income products.

• Expansion of the Pensions Loan Scheme to allow more Australians to use the equity in their homes to increase their incomes.

I think this will be a major bonus for those with a lumpy asset or shareholding’s they wish to retain but need more cashflow. At a current rate of 5.25% the Pensions Loan Scheme is a very decent rate and security that you are borrowing from a bank or predatory lender based on a brokers conflicted commissions.

Personal income tax bracket changes (take most these with a pinch of salt!)

The Government has provided personal income tax relief to lower and middle income earners. A Low and Middle Income Tax Offset will now be available for individuals with incomes of up to $125,333.

The $87,000 income threshold, above which a 37 per cent tax rate applies, will increase to $90,000.

Other changes

• A surplus of $2.2 billion is expected in 2019-20, one year ahead of schedule.

• The Government’s planned increase in the Medicare levy from 2 per cent to 2.5 per cent, to fund the National Disability Insurance Scheme, will now not go ahead due to increased tax revenues.

How can we help?

Some of these measures may open up strategy options for you and your family.

If you have any questions or would like further clarification in regards to any of the above measures outlined in the 2018-19 Federal Budget, please feel free to give me a call or email to arrange a time to meet or talk by phone so that we can discuss your particular requirements in more detail.

Are you looking for an advisor that will keep you up to date and provide guidance and tips like in this blog? then why now contact me at our Castle Hill or Windsor office in Northwest Sydney to arrange a one on one consultation. Just click the Schedule Now button up on the left to find the appointment options.

This information has been prepared without taking account of your objectives, financial situation or needs. Because of this you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation and needs. This website provides an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such.

Retirement. It’s something you’ve thought about for years but kept saying you will deal with it nearer the time. But how do you make sure you’re ready to deal with change when you do come to retire?

So this blog is not about money, it’s about managing change, anxiety and relationships during one of the biggest changes in your life. It has been adapted from an US article.

Retirement might be your time to do your own thing, to travel overseas, go bush in the outback, spend quality time with your loved ones, to return to education, start a different career, take up a volunteer activity, begin an exercise program, or pursue a hobby. There are so many things you could be doing with your newfound time. It seems as though the possibilities for life changes in retirement are endless. But many struggle in that initial period.

Even though you are excited to enter this new stage of life, the amount of change can feel overwhelming and it can intimidating to handle change in retirement. If a lifetime of work demanded much of your time and attention, you may not have had the opportunity to develop many leisure time interests. You may find yourself looking for new things to do and get involved with.

If many of your social activities have involved people from work, you may want and need to develop friendships that are based on your new interests (think about Rotary, Probus, Men’s Shed, Book Club, Classic Car Group, Yoga, Red Hat Society, Bush Walking Club etc.). If you are retiring and adjusting to an empty nest at the same time, you may feel especially challenged handling all of this change associated with retirement. Despite wanting to retire, adapting to so many changes in your life can be difficult.

How you’ve handled change during your lifetime can offer insight into how well you’ll adapt to change in retirement. Having an awareness of how to better manage change can improve your adjustment to retirement.

Here are ten questions to ask yourself about handling life changes in retirement:

1.What changes do you want to make in your life? This is a big question but you probably have some ideas of things you’d like to start doing or do more of. Exercise, travel, family time and household projects are all common starting points. Make a list and begin to identify all the ways you want to change your life in retirement. Tip for Ladies: Is your husband struggling for ideas? Try “101 Things to Do With A Retired Man: … to Get Him Out From Under Your Feet!”

2. Why do you want to make these changes? It’s not enough to say you want to improve your diet or read more books. It’s time to figure out the benefits of making these changes. What will you gain by eating differently or reading more? Recognise why you want to make the change so that you’ll be encouraged to follow through with it.

3. What change do you want to make first? If you’ve been thinking about all you could do in retirement, you may discover that it’s hard to figure out where to begin. Feeling overwhelmed by the choices may mean that you don’t select anything. Keep it simple. If you could change just one thing, what would it be?

4. What impact will your changes have on others? Often if we change something in our life, it has a domino effect. If you go back to school, you may need to use weekend time for studying. If your volunteer project involves evenings, you may need to give up some family time. Recognise that others in your life may question the changes that involve them. Talk about the upcoming changes with significant others and gain their support.

5. Are you willing to change? Are you going to be frustrated making a change in your life when it isn’t something you truly want to do? If you’re a stay-at-home person, don’t kid yourself and try to adopt a freewheeling, caravanning lifestyle just because others say you’ll love it. This is could be a change that you won’t really be willing to make long-term.

6. Are you ready to change? It’s one thing to say you want to start exercising, volunteering or start learning a language. Doing it may be harder than you think. You may be someone who finds change is really difficult. If that’s you, prepare yourself mentally for more challenges right at the start.

7. Are you prepared to make the effort? Making changes in your life requires an effort. Be ready for a learning curve and some inherent frustrations. As adults, we get comfortable in our habits and routines. If you really want to begin an exercise program, you may need a significant amount of willpower to get yourself started.

8. Who can help you change? When you’re learning something new, ask for help. Join a group, connect online or ask others in your network for advice. You may have spent your whole life wanting to figure things out for yourself. Recognise that your time now is a valuable resource. Don’t waste it. Ask for help.

9. Can you check your ego at the door? The first time you try doing something new, it’s likely you won’t be great at it. New things take practice. Don’t let your fear of failure or ego get in the way of learning something new. Look at it this way—you made it this far in life, you are certainly capable of learning a yoga pose or to put up shelves.

10. Are you seeing the results you expected? Make your changes and give yourself a reasonable amount of time to get used to them. Are you seeing the benefits you expected? If not, chalk it up to good experience and move on.

Accept that retirement will bring many changes in your life. Increasing your awareness about how you adapt to change will contribute to your overall retirement happiness.

Looking for an adviser that will keep you up to date and provide guidance and tips like in this blog? Then why not contact me at our Castle Hill or Windsor office in Northwest Sydney to arrange a one on one consultation. Just click the Schedule Now button up on the left to find the appointment options. Do it! make 2018 the year to get organised or it will be 2028 before you know it.

Please consider passing on this article to family or friends. Pay it forward!

This information has been prepared without taking account of your objectives, financial situation or needs. Because of this you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation and needs. This website provides an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such.

I have adapted this content to Australian circumstances from an original American article on retirementstyle.com By Deborah Williams

Here are some of the key issues we will discuss with you to get a better understanding on whether an SMSF is suitable to meet your objectives and circumstances. They have been developed to address concerns about people being pushed or rushing in to a SMSF. We want to protect access to the SMSF option for the long-term.

What do you or your family want to achieve by establishing an SMSF . This explores your reasons for investigating this strategy and if it aligns with your short, medium and long-term goals or is it something you have just felt was right for you. We will have no hesitation in suggesting you consider alternatives that may meet your true objectives. We don’t believe an SMSF is right for everyone.

Is contributing more to superannuation the right option for you at your age when we take in to account your financial commitments now and in the future as this money will be locked away until you meet a condition of release most likely in your 60’s. It may be more appropriate for your to concentrate on using excess funds for debt reduction, medium term investing in your name or an insurance bond for tax minimisation while retaining access to the capital. We develop our strategies to suit you!

Is running a strategy via an SMSF suitable for you in terms of your experience, knowledge and available time. There are many busy executives, truck drivers and small business owners that I have had to talk out of running and SMSF when they can’t even find 1 hour in their week to schedule a meeting or even engage via Skype to understand their trustee obligations.Yet they thought they run a $800,000 investment portfolio! I hesitate to mention the one who said he could do his research while driving to work on his mobile! Or the couple who felt they were “property experts” because they had 4 Queensland regional properties, having never once visited any of them or done more than a cursory Google search using the highest valuations found and ignoring recent listings. By the time we analysed the portfolio they were going nowhere, low-income and negative capital growth. On asking for Property Inspection reports we found they were also up for tens of thousands in repairs and maintenance over the coming years. It was agreed that their super was safer in their well diversified existing strategy than another “punt” on property in an SMSF until learned more about property investing from a Buyer’s Agent.

What funds do have to rollover from an existing fund(s). Are you able to move those funds? Some people are in government, military or state funds that cannot be accessed before a certain age like MSBS or Local Govt Super or maybe a Defined Benefit Scheme that’s too sweet to leave! Are you able to redirect future Super Guarantee contributions from your employer as some have a mandated fund under enterprise bargaining agreements etc. Are there high exit fees or underlying investments that are not liquid? Is it the right move for you?

Have insurance needs been adequately identified and addressed for your future protection? We have to look at the current insurances in place and do a needs analysis to see if they should be maintained, altered, replaced or cancelled.

We need to know if you are aware of and clear about trustee responsibility? This blog and other material we point you to will give you the knowledge base you require to run a fund. We may suggest you do this education before committing to setting up the SMSF. Your urgency to set up a fund does not let us abrogate our duties. We provide a free Education Module on SMSF in our Verante Financial Knowledge Centre

We will walk you through the costs of setting up and administering the SMSF annually as well as costs related to specific strategies you want to undertake? This includes fees associated with all related aspects of SMSFs including advice, investments, establishment, legal and administration?

We will help you with the development and management of the SMSF investment strategy and ensure it is compliant and will help achieve your objectives. We will ground you in reality (no reasonable investment will provide excessive returns long-term so we might burst a few myths.

If the SMSF is to engage in borrowing or gearing? We will guide your around what is a reasonable level of gearing in your circumstances and to achieve your retirement plans and analyse the affordability of the gearing strategy. We will provide you with a full 3 step guide on the rules, the process and the mistakes to avoid during implementation.

One last warning :

We want you to use the right strategy at the right time for your future financial security.

This may explain why 2017 we were recognised among the best of the best in a number of professional awards.

Are you looking for an advisor that will keep you up to date and provide guidance and tips like in this to help you run your SMSF or help your clients if you are an Accountant, Mortgage Broker or Lawyer? Then why now contact me at our Castle Hill or Windsor office in Northwest Sydney to arrange a one on one consultation. Just click the Schedule Now button up on the left to find the appointment options.

This information has been prepared without taking account of your objectives, financial situation or needs. Because of this you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation and needs. This website provides an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such.

For the last decade every time I saw the SMSF statistical results issued by the ATO I was dismayed by the number of new SMSF funds being set up with Individual Trustees, often well over 80% each year. I assumed this was people setting up self managed superannuation funds without good advice or reasonable research.

So I was delighted to see the latest stats provided by the ATO for 2015-16 but including some 2016-17 data which has seen a complete turnaround with over 80% of new SMSFs being set up with Corporate Trustees and the overall numbers on existing funds turning in favour of using a company.

SMSF trustee structure

At 30 June 2017, 57% of all SMSFs had a corporate trustee rather than individual trustees.

Of newly registered SMSFs in 2015 to 2017, on average 81% were established with a corporate trustee.

A few times over the last 5 years I have run polls asking professionals in the SMSF industry whether they would recommend individual or corporate trustees. Every time the overwhelming result is in favour of Corporate Trustees.

So over 90% of professionals who deal day in day out with SMSF issues and like myself deal with some of the fallout when approached by grieving widows(ers), recommend a Corporate trustee for an SMSF.

Costs

Costs should not be a deterrent as a sole Purpose Trustee company only costs about $600-$880 to set up and the ASIC review fee is only $48 per year and you can lock that in and get a discount for up to 10 years. See here for more detail on that discount.

Are you looking for an advisor that will keep you up to date and provide guidance and tips like in this blog? Then why now contact me at our Castle Hill or Windsor office in Northwest Sydney to arrange a one on one consultation. Just click the Schedule Now button up on the left to find the appointment options.

This information has been prepared without taking account of your objectives, financial situation or needs. Because of this you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation and needs. This website provides an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such.

When I talk to self-directed SMSF trustees their excuse for not diversifying more from Aussie Shares and Term Deposits was that it was difficult to understand some sectors and to get a decent diversification without building a huge portfolio of stocks, unlisted managed funds, bonds, hybrids etc. They hated application forms especially for SMSF investments but they have been reluctant to use a platform despite my argument that often a platform was a useful vehicle. Most just are not interested in another layer of fees for their SMSF. Each to their own so I left the argument there. However now the mountain is coming to them!

The following is general information and not a recommendation, you still need to do your own research or get advice for your personal circumstances.

In November 2017 Vanguard Australia finally launched a suite of four exchange traded funds (ETFs) that provide greater access to their leading diversified portfolio strategies. This will make SMSF and personal investing a far more accessible and transparent option for many and ultimately help them achieve their financial goals at a lower cost, easier reporting and with less paperwork than currently. They offer a great opportunity to develop a well simple, market leading diversified core to your portfolio.

The four Vanguard Diversified Index ETFs build on their extensive suite of ETFs and unlisted Managed Funds, and are one of the first ETFs allowing investors to gain diversification across and within all major asset classes, while making a clear choice about how much risk they take on. I would argue that AMP’s DMKT and Schroder’s GROW do this to some extent but not at this low a cost as they are actively managed an many might think they are a good blend with Vanguard’s new range.

The conservative (VDCO), balanced (VDBA), growth (VDGR) and high growth (VDHG) ETFs offer investors simple, single trade access to Vanguard’s global expertise in portfolio management and asset allocation, with annual investment costs at just 0.27 per cent. Yes that’s only $2.70 management fee for every $1000 invested in a diversified portfolio, wipe the floor of many industry and retail super funds.

Each Diversified Index ETF is a share class of an existing Vanguard Diversified Index Fund, meaning ETF investors can tap into the benefits of an established asset pool, collectively worth more than $7 billion, through Vanguard’s existing range of non-listed multi-asset funds. Vanguard’s Diversified Index Funds consistently rank in the top quartile of performance with their peers over three, five and 10 year periods, according to Morningstar.

Yes you are giving up some transparency and control but I believe you can rely on Vanguard’s investment experts to continuously assess their portfolio’s exposure and periodically rebalance it back to its intended level of risk.”

Each Vanguard Diversified Index ETF provides investors with extensive global exposure to around 6500 individual companies and more than 5000 fixed income securities.

Just in case you have not heard of Vanguard, here is a little detail to help build a picture of their strength and reach:

The Vanguard Group, Inc.: Key facts and figures*

Founded

1975

Total assets under management

AUD $5.9 trillion

Funds offered

180 in the US, and 190 funds in markets outside the US

Ownership

The Vanguard Group, Inc. is owned by its US-domiciled funds,

which are owned by their shareholders.

Headquarters

Valley Forge, Pennsylvania, USA

Chairman and CEO

F. William McNabb III

Number of employees

About 15,000 worldwide

Vanguard’s Investment Strategy Group, a global team of researchers and analysts, set the asset allocation of the diversified funds as part of a robust framework used by Vanguard globally. This framework includes analysis of concentration risk and currency exposure, and incorporates comprehensive modelling generated by Vanguard’s proprietary forecasting engine, the Vanguard Capital Markets Model.

Looking for an adviser that will keep you up to date and provide guidance and tips like in this blog? Then why not contact me at our Castle Hill or Windsor office in Northwest Sydney to arrange a one on one consultation. Just click the Schedule Now button up on the left to find the appointment options. Do it! make 2018 the year to get organised or it will be 2028 before you know it.

Please consider passing on this article to family or friends. Pay it forward!

This information has been prepared without taking account of your objectives, financial situation or needs. Because of this you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation and needs. This website provides an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such.

I am being inundated by queries from young men aged 20-40 looking to learn more about Bitcoin and then a cohort of traditional SMSF trustees aged 40-70 who have an interest in alternative investments and especially Gold who now want to at least know more about Bitcoin and cryptocurrencies in general. so when I came across this latest paper dealing with both subjects from my good mate Jordan Eliseo, Chief Economist at ABC Bullion I twisted his arm to let me share it to my readers.

The key finding of his paper are:

KEY FINDINGS

Blockchain technology has serious real world applications – it is here to stay

Given valuations in broader financial markets, it can make sense to speculate in the cryptocurrency market with a small portion of one’s wealth

Cryptocurrencies like Bitcoin are money today, but whether that status will endure remains to be seen

Physical gold remains the simplest and most effective hedge against the monetary, market, and macroeconomic risks that investors confront today

Now, if you are determined to go ahead and invest in Bitcoin or other cryptocurrencies then you need to do some serious groundwork.

NOTE: I DO NOT RECOMMEND CRYPTO CURRENCIES AS A SUITABLE INVESTMENT FOR AN SMSF, I AM JUST MAKING SURE THAT THOSE WHO DO INVEST DO IT COMPLIANTLY

How the SMSF regulations affect investing in Bitcoin, Ethereum or other cryptocurrencies

SMSF Professionals and Trustees should be well aware of the restrictions placed on the investment choices of SMSFs by the Superannuation Industry (Supervision) Act 1993 and supporting regulations. The Australian Taxation Office (ATO) is in charge of the administration of these rules and they have issued this guidance on their website:

Although there are not yet any formal rulings from the ATO clarifying how the rules apply to Bitcoin, there are a number of Tax Determinations that help guide any SMSF Trustees considering investing in bitcoins.

TD 2014/25 Income tax: is bitcoin a ‘foreign currency’ for the purposes of Division 775 of the Income Tax Assessment Act 1997 (ITAA 1997)

TD 2014/26 Income tax: is bitcoin a CGT asset for the purposes of subsection 108-5(1) of the Income Tax Assessment Act 1997 (ITAA 1997)

TD 2014/27 Income tax: is bitcoin trading stock for the purposes of subsection 70-10(1) of the Income Tax Assessment Act 1997 (ITAA 1997)

Considerations before investing in Bitcoin:

Is it right for your needs and objectives? Consider if an investment in Bitcoin would satisfy the ‘sole purpose test’? – Are you honestly investing in it for your retirement?

In your circumstances does Bitcoin investing suit your risk tolerance (and the other member’s of your SMSF) and have you done enough research to validate your investment decision,

Does you Trust Deed allow for investing in bitcoins or cryptocurrencies. Read your deed and maybe ask the trust deed provider.

Talk to your fund’s auditor before proceeding as they have to sign off on the investment’s validity annually so better to run the strategy by them upfront.

They may ask you to verify the following:

If you wish to proceed with a purchase then have you amended your SMSF’s investment strategy to cater for this investment? Click the link for more details.

Trap: Make sure you know who is in ‘control’ the bitcoins? All assets must be clearly in the name/control of the trustees of the fund

How would the SMSF acquire the bitcoins? Do not acquire them from yourself or a “related party”

How secure is the exchange/wallet you are storing your cryptocurrencies in. Some have been hacked and coins lost.

No matter what it is essential to do you research and not take a gamble with your retirement nest egg unless you have covered all your bases.

Audit Tip:

Auditors and trustees can have access to the single public ledger that records Bitcoin. Websites such as Blockchain, BlockExplorer and Blockonomics allow input of a transaction ID to get detailed data of that Bitcoin transaction. Third party verification for auditors is therefore also possible. You can obtain a transaction list from the SMSF wallet provider and verify each holding. I am sure further tools will become available.

Looking for an adviser that will keep you up to date and provide guidance and tips like in this blog? Then why now contact me at our Castle Hill or Windsor office in Northwest Sydney to arrange a one on one consultation. Just click the Schedule Now button up on the left to find the appointment options. Do it! make 2016 the year to get organised or it will be 2026 before you know it.

Please consider passing on this article to family or friends. Pay it forward!

This information has been prepared without taking account of your objectives, financial situation or needs. Because of this you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation and needs. This website provides an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such.

It always amazes me that very often when I take an SMSF under my advice that I find that the estate planning and use of Binding Death Benefit Nominations has been haphazard, lacking in essential detail, ignorant of the SMSF deed requirements or just missing. People spend their lives amazing a nestegg only to be lax in ensuring it goes to who they want when they die.

A recent decision has clarified three issues regarding the validity of binding death benefit nominations. I have relied on the following summary from Townsend Law’s Michael Hallinan for interpretation of the decision.

A recent decision of the South Australian Court of Appeal (Cantor Management Services Pty Ltd v Booth [2017]) has passed important comment on no less than three different issues regarding the validity of a binding death benefit nomination (BDBN).

The critical issue was whether a BDBN was valid. If valid, then the death benefit was payable to the estate of the deceased member. If invalid, then the trustee would decide the allocation of the benefit.

The validity turned upon the issue of whether the BDBN had been served on the corporate trustee. The BDBN had been signed by the member and then left in the possession of the accountants of the SMSF at their office which was also the registered office of the corporate trustee.

Issue No 1

The sole director of the corporate trustee had argued that as the BDBN had not been provided to the director nor had the accountants been expressly authorised to accept and hold the BDBN on behalf of the corporate trustee, then the BDBN had not been properly served on the corporate trustee.

The Court did not accept the argument put by the corporate trustee. The Chief Justice held that it was sufficient to constitute service on the corporate trustee for the BDBN to be held by the accountants of the SMSF at the registered office of the corporate trustee. The other justices agreed with the Chief Justice.

Issue No 2

The second issue was that the Court opined that the accountants had a duty to keep the BDBN safe and also had a duty to bring to the attention of the trustee of the SMSF that they held the BDBN. If the Court had held that service had not been properly effected, the defendant may have been able to sue the accountants for their negligence in failing to advise the trustee that they were holding the BDBN. Luckily for them the Court said that service was good anyway.

Issue No 3

The third issue was that Court agreed with the decision of Munro v Munro, which held that SIS regulation 6.17A does not apply to SMSFs (unless the trust deed of the SMSF explicitly or implicitly incorporates the regulation). It is surprising that a few industry die-hards still argue that reg 6.17A might still apply to SMSFs despite the number of times the courts have said otherwise.

The original article by Michael Hallinan of Townsends Business & Corporate Lawyers can be found here and you can contact them on (02) 8296 6222. I highly recommend signing up for their newsletter.

Make sure to check your with your own current death benefit arrangements or contact us for a review.

Looking for an adviser that will keep you up to date and provide guidance and tips like in this blog? Then why now contact me at our Castle Hill or Windsor office in Northwest Sydney to arrange a one on one consultation. Just click the Schedule Now button up on the left to find the appointment options. Do it! make 2016 the year to get organised or it will be 2026 before you know it.

Please consider passing on this article to family or friends. Pay it forward!

This information has been prepared without taking account of your objectives, financial situation or needs. Because of this you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation and needs. This website provides an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such.

Your superannuation trust deed along with the superannuation laws form the governing rules that self managed super funds (SMSFs) needs to operate by. The introduction of the $1.6 million transfer balance cap (TBC) and new transition to retirement income stream (TRIS) rules are a ‘game changer’ for SMSFs when discussing benefit payments and estate planning. With the new super rules in effect as of 1 July 2017, now is the right time to review if your trust deed needs to be enhanced or amended to deal with the new approaches and strategies you may need to implement.

Read the deed

The first step in reviewing your superannuation trust deed will be to read it. Trust deeds are legal documents which can be complex to read, so you may want help from an advisor with this.

It is likely that most deeds will not result in a breach of any superannuation laws and would provide the trustee with powers to comply with relevant tax and superannuation laws as they change over time.

The next step would be to review the deed in consideration with your own circumstances.

For example, a common scenario may be a restrictive deed that only provides the trustee with a discretion to pay death benefits. Therefore, if a member of that SMSF wanted to create a binding death benefit nomination, it would be irrelevant due to the deed’s governing rules.

In any event, deeds which are clearly out of date will need to be amended as soon as possible.

Deeds post 1 July 2017

Post 1 July 2017, there are many approaches and strategies that will differ from the past and it is essential to ensure that your SMSF deed does not restrict you in anyway. We note the following areas should be considered:

Paying death benefits

The $1.6 million TBC now restricts the amount of money that can be kept in super on the death of a member. This is crucially important as when a member dies, their TBC dies with them. SMSF members should review their estate planning and further review their trust deed for the following:

Does it allow for binding death benefit nominations (BDBN)?

Do BDBNs lapse every 3 years in accordance with the trust deed when the legislation does not prescribe it?

Does it consider the appropriate solution when there is a conflict between a reversionary pension and a BDBN and which will take precedence?

Reversionary pensions

Reversionary pensions are pensions which continue being paid to a dependant after your death. Under the TBC, reversionary pensions will not count towards a member’s TBC until 12 months after the date of the original recipient’s death. Importantly, the transfer of the pension from the deceased to the new recipient will count towards the TBC. The value of the credit to the TBC will be the value of the pension at the date of death, not the value after 12 months. This increases the complexity of reversionary pensions prompting a review of trust deeds to consider:

Does it allow for a reversionary pension to be added to an existing pension or are there restrictions?

Should it automatically ensure that a pension is reversionary so that it is paid to a surviving spouse?

Pensions

The TBC also has implications for strategies in commencing pensions and making benefit payments. Trust deeds may need to be reviewed for:

Ensuring that commutations are able to be moved into accumulation phase rather than being forced as lump sums out of superannuation.

Are there any specific provisions relating to the TBC? There may be value in ensuring that the deed restricts pensions from being commenced with a value greater than the TBC.

Are there provisions which detail where commutations must be sourced from first?

Are there restrictive pension provisions that the trustees must comply with?

Transition to retirement income streams

Tax concessions for TRISs where the recipient does not have unrestricted access to their superannuation savings (known as meeting a condition of release with a nil chasing restriction) have also been removed. Trust deeds may need to be reviewed for:

Does the deed allow for the 10% maximum benefit payment to fall away once a nil condition of release is met?

Does the deed deal with a TRIS’s character when a nil condition of release? (Does it convert into an account based pension?)

How can we help?

SMSF Specialist Advisors can help you understand how the new laws may impact you and partner with a lawyer/Deed provider to review and amend your trust deed as required. Please feel free to give me a call to arrange a time to meet so that we can discuss your particular requirements, especially in regards to issues that may arise out of the latest super laws, in more detail.

For further educational information please subscribe to this blog and also visit the SMSF Association’s Trustee Knowledge Centre (http://trustees.smsfassociation.com/) to keep on top of the latest changes and information to reach your retirement goals and get the most out of your self managed super fund.

Want a Superannuation Review or are you just looking for an adviser that will keep you up to date and provide guidance and tips like in this blog? Then why now contact me at our Castle Hill or Windsor office in Northwest Sydney to arrange a one on one consultation. Just click the Schedule Now button up on the left to find the appointment options. Do it! make this the year to get organised or it will be 2028 before you know it.

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This information has been prepared without taking account of your objectives, financial situation or needs. Because of this you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation and needs. This website provides an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such.

I love working on strategies for clients but sometimes you just need a true expert or excellent software to crunch the numbers. I was looking for some ideas on downsizing as it had become clear to me that is was not the panacea to retirement funding that client’s often believe it would be. So I was looking for an in-depth article working through the numbers and Rob van Dalen of Optimo Financial has kindly stepped up to provide the required analysis in our latest guest blog. Rob’s main warning is to do your sums on your own particular situation before leaping in to a downsizing strategy.

Do Your Sums Before Downsizing

A popular subject often talked about at family barbecues is; “should mum and dad downsize when they get older?” Often it’s assumed that downsizing is the best option moving forward. To test and possibly challenge this we decided to run a few scenarios through our Pathfinder Financial Optimisation Platform to find out. Read our findings below;

1.1 The Clients

In this example, we look at the case of David and Alice who have recently retired and who will soon both be eligible for the age pension. David was born on 11 April 1953 while Alice was born on 15 November 1952. They have a modest $400,000 in super. Their other assets are the family home valued at $900,000 and personal assets valued at $40,000. They have no debt. They would like to have $50,000pa (increasing at CPI) for living expenses. They are worried that their super is not sufficient to maintain their desired income. Consequently, they have contemplated selling the family home and moving to a cheaper area where they could buy a new home for $500,000. Will downsizing leave them better off?

1.2 Assumptions

We have assumed in the analysis:

· Pension fund returns 5.7%pa;

· House selling costs 2.5%;

· House purchase costs 6% (including stamp duty);

· House prices in the long term increase at 3%pa;

· CPI 2.5%p.a.

1.3 Scenario 1: Retain Current Home

We first examine the scenario where David and Alice retain their current home. In this case, they will receive income from the government pension as well as drawing a pension from their own super. Figure 1 shows the sources of their income over a 20 year period.

David and Alice receive approximately 64% of their income from the age pension and associated benefits (see also Figure 6 below). The remainder is withdrawn from their pension account through withdrawing the minimum amount each year (plus some extra for the first few years until they become eligible for the age pension).

Their age pensions are limited approximately equally by the income and assets tests. After 20 years, David and Alice have a combined wealth of $1,960,000 most of which is from the family home.

1.4 Scenario 2: Downsizing Family Home in 2016/17

The next scenario sees David and Alice downsizing their family home from $900,000 to $500,000 in 2016/17. Their ages enable them to deposit the excess funds generated from the house sale into super as non-concessional contributions. However, a Pathfinder® analysis shows that increasing their superannuation balance reduces their age pension because, unlike the family home, super counts towards the age pension assets test and is deemed for the income test. Figure 2 shows the results of the age pension assets and income tests for David and Alice and we can see that their pension is now limited by the assets test. For a home owning couple, the age pension reduces at a rate of $3 per fortnight for each $1,000 of assets in excess of $575,000. This taper rate was doubled from 1 January 2017, so now has a much larger impact on the pension received.

So in 2019/20, for example, their age pension reduces from $36,337 to $9,004 and they must draw more from their pension account to make up the difference. Their wealth after 20 years is now projected at $1,581,000 or about $379,000 less than in the first scenario.

1.5 Scenario 3: Downsizing Family Home in 2027/28

In the third scenario, we examine the possibility that David and Alice defer the downsizing for ten years, say in 2027/28. Their age pension is initially unaffected until they downsize the family home, but after that time their age pension payments are severely curtailed. Their projected wealth after 20 years is now $1,714,000. This is a better outcome than in the second scenario but is still $246,000 less than if they keep their existing home.

1.6 Comparing the Scenarios

Figure 3 gives a comparison of the annual age pension received in the three scenarios. You can see that the scenario where they retain their current home, yields a higher pension and that their pension drops sharply after the sale of their house in the other two scenarios.

Figure 4 shows the total age pension payments over the 20 years. You can see that by keeping their original family home, their total pension entitlement is significantly higher than either of the downsizing options we analysed.

Figure 5 shows the total wealth over the 20 year period analysed.

The first point to note is the importance of the age pension towards retirement income, depending, of course, on the particular circumstances. Figure 6 shows the composition of retirement income over the 20 years analysed for Scenario 1.

1.7 Conclusions

In this example, the age pension plus estimated concession card benefits contribute about 64% to income while the account based pensions contribute about 36%. The second point is that downsizing the family home may not result in improving the overall situation as an increase in payments from a private pension may be more or less offset by a decrease in the age pension.

1.8 Pathfinder Learnings

In our Pathfinder® analysis, we find, perhaps surprisingly, that a couple could be considerably worse off by downsizing the family home. Any funds added to super by the income generated from downsizing could be dissipated by a reduction in the age pension. In addition, the costs of sale and repurchase of a family home are significant.

The age pension can provide a buffer between retirement savings and lifestyle expenses.

For persons eligible for the age pension, downsizing the family home may leave you worse off financially because of the impact of the age pension income and assets test.

Thank you Robby

Are you looking for an advisor that will keep you up to date and provide guidance and tips like in this blog? Then why now contact me at our Castle Hill or Windsor office in Northwest Sydney to arrange a one on one consultation. Just click the Schedule Now button up on the left to find the appointment options.

This information has been prepared without taking account of your objectives, financial situation or needs. Because of this you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation and needs. This website provides an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such.

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Verante Financial Knowledge Centre
We understand that the financial industry is full of jargon and concepts that can be difficult for people to get their head around or remember. So to learn more about money and finance at our Financial Knowledge Centre is a great place to start.